DATADOT TECHNOLOGY LIMITED — AGM Information 2009

Oct 15, 2009

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Chairman’s Address - 2009 AGM

The 2009 financial year has been a very difficult year for the Group with both the global financial crisis and the need for a very significant restructuring of management impacting the Company’s activities.

During the year the Group generated a loss from total operations of $10.985 million compared to a profit of $1.305 million in 2008.

The majority of these losses arose from the impairment of the Automated Application Cell, the Laser X project and DataTrace development costs, together with the write down of our DataTrace investment and carrying value of tax losses in the United States.

Our net loss from continuing operations, after removing the restructuring and impairment impacts as outlined in this address, was $914,000 compared to a loss of $350,000 in 2008.

The impact of the severe deterioration in global trading conditions, particularly in the motor vehicle sector causing a decline in product sales and revenue from the motor vehicle related channel, reflected in the revenues of continuing operations being $8.16 million compared to $9.56 million in the prior financial year - a decrease of $1.4 million (15%).

During the year DataDot’s 42.5% equity interest in DataDot Technology South Africa (Proprietary) Limited (DDSA) was sold via a put and call agreement to the two South African shareholders who manage DDSA. The put and call agreement allows progressive payment and disposal of DataDot Technolog’s shares in DDSA. The put side of the agreement allows DataDot Technology to require DDSA to complete the sale in 18 months from the date of execution. DDSA is now reflected in the financial statements as a discontinued operation with prior year income statements and segment information having been restated accordingly. The results shown in discontinued operations are for the period from 1 July 2008 to 11 March 2009, after which time only royalty revenue is received from South Africa.

As the likelihood of an Original Equipment Manufacturer (OEM) taking on production-line fitment of DataDots in the prevailing market was determined to be low, the Board determined that the DataDot Automated Application Cell (DAAC) should be impaired, resulting in an impairment loss of $2.6 million, which was offset to the extent of $1.367 million by recognizing related deferred income. The Board also considered it prudent to fully impair the Laser X Project, which incurred an impairment loss of $385,000.

Consistent with the decision of the DataTraceDNA Pty Limited (DataTrace) Board to fully impair the capitalised development costs of DataTrace, the Board of DataDot determined that the investment in DataTrace was fully impaired, incurring an impairment loss of $3.217 million (2008:$Nil). In addition, the full impairment of DataTrace capitalised development

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led to a full year loss after tax in DataTrace of $4.193 million of which DataDot’s 50% share of the joint venture equated to $2.096 million. These decisions were driven largely by the failure of the Company to meet previous management forecasts and uncertainty as to future revenue streams. Whilst this situation appears to be improving there is considerable work to be done to restore value in that investment.

During the past six months management has taken significant steps towards ensuring that these losses are substantially reduced and that the Group starts receiving some benefit from the extensive investment made to date.

During the year the Board and management also undertook a major restructure to significantly reduce costs, improve the efficiencies in relation to the cost of goods sold and diversify the revenue base. This will reduce the Group’s reliance on Automotive OEM customers and re-focus the effort on revenue generated in non-vehicle channels.

The restructure focused on changing the remuneration structure of sales staff to performancebased pay and transitioning to an NPAT-driven culture. It involved the cessation of employment for several senior executives.

A restructuring charge of $931,000 was incurred in the second half of the year in relation to these changes.

May I take this opportunity to correct an error in the 2009 Annual Report. Our previous CFO, Matthew James, ceased employment with the Company on 14[th] November 2008, not 31[st] January 2009 as mistakenly published in Table 1 of the Remuneration Report. The later date was the last day of his subsequent engagement as a consultant.

As to the individual geographical business units:

In Australasia product sales decreased by $1.016 million (17.3%) from $5.866 million to $4.85 million, primarily due to the global downturn in the automotive industry. DataDot ceased supplying BMW Group Australia as an OEM customer during the first half of the year. This decline was partially offset by increased sales in the heavy machinery and commercial market segments. Net profit decreased by $911,000 (39.4%) from $2.316 million to $1.404 million.

In the United States product sales decreased by $433,000 (37.0%) from $1.173 million to $740,000 and the net profit decreased by $377,000 to a net loss of $362,000 ($15,000 profit: 2008)

At 31 December 2008, in recognition of the half year performance and the significant downturn in the US auto industry, the Board no longer considered it probable that the United States subsidiary would generate sufficient current period taxable profits against which tax losses could be utilised in the short term and determined that the carried forward tax losses would be derecognised.

In Europe product sales increased by $1.1 million (171%) from $647,000 to $1.754 million, due mainly to a new agreement executed in March 2009 with Federperiti Gest S.r.l, (a service provider for insurance companies), to supply DataDot microdots as a security measure to

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mark motor vehicles insured with insurance policies sold on the Italian market by Assimoco Assicurazioni S.p.A in partnership with Fiat Sava, a subsidiary of FGA Capital.

The company has expectations that this relationship will strengthen and result in further revenues flowing from other parts of Europe in the foreseeable future.

With regard to South Africa as stated earlier, the Group decided to progressively dispose of Datadot Technology’s 42.5% equity interest in DataDot Technology South Africa (Proprietary) Limited (DDSA) to the two South African shareholders who manage DDSA. Effective 11 March 2009, DDSA became a deconsolidated entity and DDSA results are shown as a discontinued operation.

For the period from 1 July 2008 to 11 March 2009, product sales decreased by $1.79 million (50.6%) from $3.539 million to $1.747 million . Net profit before loss on disposal decreased $595,000 (77.5%) from $768,000 to $173,000.

As to New Zealand, as outlined in DataDot’s December 2008 Financial Report for the Half Year, in early February 2009 the New Zealand Government gave notice that it would revoke the Vehicle Standards Compliance (Whole-of-Vehicle-Marking) (WOVM) Rule and WOVM Notice, which together formed the regulatory framework establishing mandatory whole-ofvehicle marking. The immediate effect of this decision was to terminate the judicial review proceedings in the NZ High Court, under which the Motor Industry Association had challenged the validity of the Rule and Notice. DataDot had successfully applied to be joined as a respondent in the proceedings.

The NZ Government has since confirmed that it does not intend to retain the mandatory WOVM policy.

However, DataDot’s New Zealand Distributor will continue to be actively seeking additional sales in channels similar to that made in Australia. A particular focus in the next 12 months will be in commercial equipment and tools and also business to business asset protection solutions.

As stated, Operating Expenses have been a focus on Board and Management attention during the year.

The Group’s operating expenses (on a restated basis and excluding restructuring expenses and impairment losses) decreased to $6.6 million from $7.02 million , a decrease in operating expenses of $420,000 (6%).

Management is continuing its focus on cost control into the 2010 year through further reviews of staffing requirements as well as assessment of more efficient and cost effective manufacturing processes.

In addition, the Board and Management have implemented major cost reductions in the past seven months and as a result of the Group’s restructure expect significant additional sustained savings. The major cost components of the restructure are termination payments associated with cessation of employment together with legal and accounting fees.

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As I alluded to earlier in light of the global downturn in auto sales and particularly the auto industry’s focus on cost reduction, a number of impairment indicators are present. These include a reducing number of auto sales and there being no present customer for the DataDot Automated Applicator Cell (DAAC). As a consequence, the Board assessed that the future income potential for this technology was uncertain and the Board therefore determined to fully impair the project, effective 31 December 2008.

The impairment losses (net of government grants) of $1.25 million represent impairment, in full, of capitalised development costs of $2.607 million for the DAAC net of government grants of $1.358 million received. These Government grants provided to the Group to assist with the development of the DAAC technology were to be released to the income statement over the expected useful life of the asset upon completion of the development. The total value of the deferred grant income was fully recognised at 31 December 2008.

There were also a number of impairment indicators being present to create sufficient uncertainty as to the future commercial potential to the Laser X Project, such that the Board has assessed that the commercialisation of the period is not certain. As a consequence, the Board decided to fully impair the project, effective 31 December 2008, incurring an impairment loss of $386,000.

As to liquidity and cash resources there was a decrease in cash in the year ended 30 June 2009 of $1.886 million compared to $2.031 million in 2008. There was an increase in cash flows from financing activities for the year ended 30 June 2009 due to a share placement and a rights issue during the year.

Operating activities consumed $2.383 million (2008: generated $749,000). This decease is a result of lower sales to customers along with restructuring costs.

Cash inflows from financing activities totalled $1.507 million (compared to an outflow of $406,409 in 2008). This movement resulted from the share placement and 1:1 rights issue in the 2009 year.

Cash outflows from investing activities during the year ended 30 June 2009 deceased to $1.01 million compared to $2.374 million in 2008. The cash outflows were mainly attributed to investing in the joint venture DataTrace DNA Pty Ltd and to a lesser extent the DAAC.

As shareholders are aware a 1:1 rights issue was undertaken during the year to accommodate the financing requirements of the Group.

Consequently, the Financial Accounts for 2009 have been prepared on the basis of a going concern, as Directors believe that funds will be available to finance future operations, expenditure commitments and repay liabilities and that the realisation of assets and settlement of liabilities will occur in the normal course of business. The Directors believe that the Consolidated Entity can continue to meet its debts as and when they become due and payable, but if Directors consider that a strengthening of the working capital position of the Consolidated Entity is necessary, if the release of provisions that have been made in the current period are required in a more accelerated time-frame than budgeted, or if the Consolidated Entity seeks to make any acquisitions in the 2009/2001 financial year, then

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additional funds from debt facilities or the issue of new shares may be required during the year.

The Directors were greatly concerned about the declaration that all reasonable steps to minimise the potential control effect of the rights issue were not taken, particularly given that the company had relied upon legal advice in relation to both the placement and the rights issue and clearly the documents prepared in relation to the rights issue, in particular, were deficient.

In conclusion, I would like to take this opportunity to thank the staff of the company for their support standing behind the Company and enduring some of the financial constraints placed on the company in recent months.

I would also like to thank Directors for the support and assistance they have provided during the extremely difficult times.

Due to business and other commitments and, despite requests from shareholders, it will not be possible for me to continue as a non-executive Director of the company but I do commend to you Gary Flowers, Bruce Rathie and the new management team lead by Ben Bootle and ask that you give them your support so that they can finally bring to fruition the promise to the shareholders that is DataDot Technology.

I take this opportunity to thank shareholders for their support and look forward to the positive results I expect to flow from the efforts of management particularly those undertaken during the last nine months.

Allan Farrar

Chairman

October 16, 2009